Politics

The No Subsidies Energy Policy

| by Heritage Foundation

By Conn Carroll

Global Environment Fund founder and chief executive Jeffrey Leonard (not 1987 National League Championship Series MVP Jeffrey Leonard) wrote in The Washington Post last week:

If Obama wants to set us on a path to a sustainable-energy future – and a green one, too – he should propose a very simple solution to the current mess: eliminate all energy subsidies. Yes, all of them – oil, coal, gas, nuclear, ethanol, and wind and solar.

Popular Video

A police officer saw a young black couple drive by and pulled them over. What he did next left them stunned:

Popular Video

A police officer saw a young black couple drive by and pulled them over. What he did next left them stunned:

This is a fabulous idea which we genuinely hope President Obama adopts. Subsidies distort market signals creating complacency and reducing the incentive to innovate. Despite decades of subsidies, alternative energies such as wind and solar power contribute only 1% of our nation’s energy needs. Subsidies for clean coal, oil, nuclear, and natural gas are no different. Energy industries should be freed from all government subsidies. 

But conservatives should be on guard because not all energy subsidies come in the form of loopholes, payments, and loan guarantees. Mandates, like the existing ethanol mandate, or the proposed Renewable Electricity Standards are also subsidies. Indeed, later in his op-ed Leonard writes:

Eventually, when the political climate is right, it should impose some form of tariff on carbon and other greenhouse-gas emissions to ensure that the market internalizes the global “costs” of threats to the planet’s life-giving atmosphere.

Cap and trade, or any substitute carbon tax would be a huge and harmful government intervention into the energy sector and should be avoided at all costs. But Leonard does write:

Is eliminating all energy subsidies politically possible? There have always been libertarian elements in the Republican Party that have railed against “corporate welfare,” including the massive tax expenditures that favor oil production. Now they are joined by many Tea Party sympathizers who, appalled by the bailouts of the big banks and automakers, instinctively share the same hostility toward subsidies of big business.

So we find ourselves in a political moment when for the first time it is possible to imagine an alliance of GOP libertarians, disaffected environmentalists and budget hawks coming together for a grand deal that would sweep away 60 years of bad energy policy. In the spirit of bipartisanship, Obama should seize the opportunity.

Let’s hope President Obama does.